Will Microgaming Pull Out Of The Australian Gaming Market?

By now, most everyone who has the least bit familiarity with the gambling industry knows of the affinity that Australians have for gambling, particularly of the online variety. Since its inception, the growth of the Australian iGaming market has been nothing short of spectacular, and disputes about its potential as a money-earner have long been laid to rest. In fact, the country has one of the highest rates of gambling in the world, with 80% of adults having admitted to being gamblers. Adults in Australia also spend more money on gambling as compared to adults from any other country around the world–as much as $1,200 per year.

There are of course numerous sites ready and willing to feed the demand. Local outfits such as Ruby Fortune and Spin Palace are joined by a host of international brands, among them 888poker, Vera & John, and PokerStars, which recently embarked on a new supply partnership with legendary industry giant Microgaming. For years, these and many other firms have provided the gambling-hungry Australian market with ample choices with which to satisfy their cravings.

However, there are a number of proposed changes to the local gambling laws and regulations that may result in much fewer choices on the menu. In fact, depending on how the current round of proposed amendments to the country’s gambling regulatory laws will go, Australian gamblers may soon find themselves a bit starved for choices from overseas providers.

Background

As far back as 1990–when Internet gambling was still in its infancy–Australia had already begun putting together a framework by which the online gambling industry in the country would be regulated. While many other countries had yet to come to terms with the burgeoning new online gambling trade, Australia proved itself to be well ahead of the curve by instituting what would be the first of several Interactive Gambling Acts.

As comprehensive as the first–and subsequent–Interactive Gambling Acts where however, a number of key issues remained unaddressed. Over the next several years, there was mounting pressure to implement changes to the laws by which the gambling industry is regulated. In particular, the push was on for a clearer definition as to which gambling activities are legal and which are illegal. The latest result is the Interactive Gambling Amendment Bill 2016, which may just be the one that will have the most significant and longest lasting impact on the Australian online gambling industry to date.

Interactive Gambling Amendment Bill 2016

The announcement of the Interactive Gambling Amendment Bill 2016 came in the wake of the release of the Review of Illegal Offshore Wagering’s final report. Introduced in November 2016 by Australian Minister for Human Services Alan Tudge, IGA Bill 2016 is intended to amend the existing iGaming laws in the country. In particular, the proponents of the bill sought to eliminate access to unlicensed online gambling services by local players.

The bill is currently still under contention, having expectedly run into some roadblocks along the way to approval. If it does make it through every round of deliberations however, it could effectively bring about the outlawing of huge areas of the online casino and online poker gaming trade in the country.

Because sports betting is legal in Australia, local bookmakers will not be affected by the proposed legislation to nearly the same extent. However, international bookmakers will be required to sign-up for a license if they wish to continue local operations.

The rationale behind IGA Bill 2016

Long before the proposal of IGA Bill 2016, the online gambling industry in Australia was regulated by the Interactive Gambling Act 2001. A comprehensive piece of legislation that addressed many of the more common issues associated with the industry, IGA 2001 was felt by many to fall short of defining the legality of certain gambling activities. Under the said law, only online sports betting and lotteries were explicitly legalized, with practically all other gambling activities existing in a sort of gray area. This meant that while slots, table games, and online poker weren’t specifically outlawed, they weren’t legalized either.

Apart from resulting in a fair bit of confusion among the public and local and international gambling firms, the absence of clearly defined guidelines also resulted in a number of entities leveraging legal loopholes to their advantage. Some of the most controversial cases involved online live betting services that began offering customers the option to click on a web link marked “click to call”. This effectively simulated a phone call to a live betting service–which was legal under existing laws–even though the company that was hosting the link was an online betting service, which was illegal.

Some of the issues that these and other questionable practices brought up were highlighted by Australian Human Services minister Alan Tudge. “Hundreds of illegal gambling services can be accessed easily over the Internet,” he said. “There is a higher likelihood of getting into trouble online, and as many as 2.7% of online gamblers are problem gamblers, compared to 0.9% of all gamblers in general.”

Tudge went on to express his concern over illegal gambling services provided by offshore firms. “The Australian government is serious about taking tougher action against illegal offshore wagering providers, and IGA Bill 2016 seeks to do just that.” The minister also emphasized the need for online wagering providers to “meet community expectations”, saying that tougher laws will help prevent the unscrupulous activities of illegal offshore providers, and prevent them from targeting vulnerable players in the country.

The need for stricter gambling laws

It seems the minister’s concerns aren’t misplaced. There have admittedly been a number of scandals that have rocked the online gambling world over the years, with the one involving Tusk especially hitting close to home.

The Tusk Investment Corporation was one of the biggest licensees in the prestigious Microgaming Network. At its peak, Tusk had more than 28 sites operated under its brand, among them Battlefield Poker, Aceflush poker and Arctic Poker. The company also had six full online casinos to its name.

Although Tusk was officially registered in Vanuatu, the company actually operated primarily out of Brisbane. But that wasn’t the main issue. What later led to the company’s demise was its 70% rakeback deals, which were understandably tempting offers that most punters couldn’t resist. Unfortunately, this deal was simply unsustainable for the firm, and it wasn’t long before they were no longer able to deliver. This led to eCommerce and Online Gambling and Assurance (eCOGRA) pulling out its seal of approval for the Tusk Investment Corporation in February, 2008. By the following month, Tusk had effectively closed its doors.

But that wasn’t the end of it. In the wake of the company’s closure, stories began to surface of many players receiving only 5% of their funds–a far cry from the 70% that was promised. Some sites affiliated with the company also incurred huge losses. Worst still, there was talk of board members and owners of the firm receiving sizeable bonuses, the which were funded directly from customer accounts. Although these allegations have not been proven, the mere suggestion of impropriety effectively put an end to Tusk.

How IGA Bill 2016 will affect international iGaming operations

Clearly there is a need for more rigid definitions of legality and more effective implementation of laws–both existing and proposed–considering that online gambling has become a multi-billion dollar industry in Australia. But consideration will also have to be given to international operators such as Microgaming, 888poker, Vera&John, and others that have expressed satisfaction with doing business in the country.

There is no arguing that stricter regulations and better implementation are necessary to curtail the potential damage caused by illicit gambling and unscrupulous operators. Getting everyone involved in the process also helps establish online gambling’s status as a socially responsible service.

That being said, there can be too much of a good thing, and over-regulation has been known to bring about a number of negative effects. There are also concerns about how large international operators may react to increased restrictions in what was formerly a welcome market, and the impact of that reaction.

Microgaming and PokerStars are two firms that are currently in a sort of a holding pattern as they wait and see which way the legislative wind blows. In early February 2017, Microgaming announced the signing of a landmark supply deal with PokerStars, which is one of the biggest international operators servicing the Australian poker market. The deal involves launching brand-new content for PokerStars via its Quickfire open platform, and will result in a significant increase in the number of online and mobile-based titles offered by PokerStars’ Casino. Among these titles are hundreds of proprietary and third-party jackpot and slots games. Andrew Clucas of Quickfire expressed optimism about the deal, saying: “Signing a major industry name like PokerStars is always exciting for the Quickfire team.” Clucas also emphasized the importance of the deal with regard to expanding on Microgaming’s market reach.

Chief Operating Officer Guy Templer of PokerStars was equally excited about the development. Citing Microgaming’s status in the online gaming industry, Templer said that “(Microgaming’s) expertise in building industry leading slot games is second to none. We have no doubt that Microgaming’s games will be very well-received by our players and they will consolidate our position as the world’s fastest-growing online casino.”

However, the proposed legislation may just throw a wrench in PokerStars’ plans. When IGA Bill 2016 was announced in November 2016, CFO Daniel Sebag made an equally earth-shattering announcement. During the Q3 earnings call of the company, Sebag said that the company would consider blocking players from Australia if the proposed amendments to the Interactive Gambling Act were passed. Considering that PokerStars is one of the biggest players in the Australian online market, its pullout will definitely cause more than a few ripples.

While PokerStars has opted to adopt a “wait-and-see” policy, other companies have been more decisive. At the time of this writing, two international firms have already pulled out of the Australian market: 888Poker and Vera & John. A number of other operators have also expressed their intention to do so as soon as the proposed legislation takes effect.

IGA Bill 2016 hits a roadblock

That day may not come as soon as expected. Although the proposed amendments were announced in November 2016, the bill has currently hit a snag as “carve-out” amendments have been introduced. Even as both sides debated over secondary issues associated with the bill, proponents of online poker have managed to obtain the support of certain sympathetic members of parliament.

The newly proposed carve-out will affect online poker as well as online blackjack. The result of extensive lobbying by the newly-formed Australian Online Poker Alliance (AOPA) headed by Joseph Del Duca, the provision may effectively free poker and blackjack from the restrictions of the proposed amendment to IGA Bill 2016.

One of the senators that have lent his support to Del Duca is Senator David Leyonhjelm of the Liberal Democratic Party. The terms of the amendment are outlined in Sheet 8054, and simply involve adding the phrase “casino-style poker or blackjack gambling service” at the appropriate sections of the bill. If approved, this will effectively result in the legalization of online poker and blackjack.

The said amendment is by no means a sure thing. The Liberal Democratic Party in which Leyonhjelm belongs is a minority party with a modest membership base. He is also the party’s only senator, and is one out of 76 senators from various other parties. He could therefore be up against overwhelming opposition when it comes time to deliberate the bill. Although Del Duca reports that several other legislators have responded positively to the proposal of a poker and blackjack carve-out, it remains to be seen whether or not those responses will translate into actual votes when the time comes for final ratification.

The mandatory second reading for the Interactive Gambling Amendment Bill 2016 is scheduled to take place no earlier than March 20, 2017.